What happened

Shares of Pier 1 Imports (NYSE:PIR) were tumbling Thursday after the home-furnishings retailer released an underwhelming third-quarter earnings report, missing earnings estimates and lowering its guidance for the year.

As of 11:05 a.m. EST, the stock was down 30.9%.

A living room with a couch, table, and chairs.

Image source: Getty Images.

So what

Comparable sales, which include e-commerce, slipped 0.7% in the period, though management said hurricanes cost it 100 basis points in the key metric. Overall revenue was down 1.4% to $469.2 million, a reflection of the decline in comps and a handful of store closures, but that figure still beat analyst expectations at $466.3 million.

However, gross margin in the period fell 360 basis points to 37.7%, which the company blamed on "heightened promotional activity," and as a result, earnings per share declined from an adjusted total of $0.22 a year ago to just $0.09, which missed estimates at $0.12.

CEO Alasdair James noted the impact of hurricanes and promotional activity in October and November, but also said, "We saw improved sales over November, including a solid Black Friday weekend," but "overall trends dropped considerably during the first two weeks of December."

Now what

Like most retailers, Pier 1 sees sales spike during the holiday season so the weak performance thus far in December was a warning sign for investors. Even worse, the company slashed its full-year adjusted earnings per share guidance from $0.38-$0.48 to $0.17-$0.25. It also called for comparable sales to fall 1.5% to 3.5% in the current quarter -- a sign that the recent headwinds will persist.

While management said it had just completed a strategic review of the business and was working on a three-year plan to "transform the business," it's not surprising to see the stock crashing after the company chopped its earnings guidance for the year in half.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.